October 30, 2007
Elaine Meinel Supkis
The Federal Reserve's overnight rates do funny things which disturbs Bernanke who wants a fake money regime that reflects little to no inflation, supposedly. Like, get real, dude! Anyway, time to view the news through my little prism where I keep in mind the new FOREX accumulation game run by first, Japan, and now, most anyone running a huge trade surplus with the US. The Federal Reserve has all sorts of models for things but they neglect to look at harsh reality and see that the old assumptions are cruelly out of whack with the New World Order which is run not by us but by CHINA. And Russia.
From the Denninger Market Ticker:
Last week some $75 million of "fed funds" (that is, interbank overnight credit) was transacted at a rate of 15%, and "a bunch" went through in the low to mid 7s.No, I didn't mistype that. You can find the actual data at this link.
Originally I, and everyone else, assumed that the "high" was an error. A bad print. That there was no chance this was "real".
It was.
Yes, "EFF" (effective fedfunds) was right where "it should be" according to The Fed - across all transactions.
As usual, I went off to the Fed to see what was up. Here is a screenshot which I altered to show where the 15% deal was and also, in yellow, the times when the 'bids' were over the Fed's fake rate they set. Um, notice that this is nearly always, by the way, bid up beyond the Fed's line in the sand.
Here is a list of past Fed overnight rates, a section from 1974, when the government suddenly devalued the dollar at the Bretton Woods II meeting and of course, the Arab oil boycott which put us in an oil squeeze when the government put price controls on US oil wells and the oil pumpers capped their wells in retaliation.
Only 6 years later, it got much worse:
One of our readers sent this link. I was curious about it since it involves tidbits of data. Like a cat's paw marks on wet cement...ever pour cement? At night, all the animals come to walk on it. When I poured the cement floor to my basement, the dogs, cats, a deer and one horse hoof print appeared at night on it. I didn't fill them in, they amuse me. Anyway, in the banking system, things have to run 24/7 so the Federal Reserve is always open for special solicitations for funds. Generally speaking, banks prefer to make deals with each other and not share 'business' but when business involves working with stinky things like trashy tranches, the Fed is the bank of last resort.
The other time of mega-high rates was in 1980 due to the Iran oil boycott and hyperinflation at home. Unlike Greenspan, Volker raised rates to equal the real inflation rate. I genuinely believe that virtually no one remembers this time period. I remember because I had to do business via barter back then due to high rates. Certainly, I couldn't call a banker. And that was also when banks gave me trouble with money I deposited. They held onto it for as long as possible while I wanted it as fast as possible. Check clearing took forever.
Remembering all this, we look at that 15% deal in mid-October with a sens of foreboding. When there was this sudden hike in the overnight funds meaning that someone came slinking up to the Fed window with a bag of cow droppings, they couldn't get anyone to give them lending loot except at a very high rate indeed. Namely, someone thinks these guys who are probably attached to some pirate ship out at sea, are not long for this world. Too bad we can't tell who this person is. As I keep saying, despite the claims that we have an open system, it is very much 'insider trading' all the time. We get to know enough to think we know what is going on. But this is an illusion.
The Fed ought to NOT help in this. If the pirates don't want us to know about their skullduggery, this is OK with me so long as they don't come to the US to dugger the skulls. Our President and a host of others in our government, by the way, are literal skullduggers via the Skull and Bones at Yale.
I would like to urge Bernanke to reveal all the identities of all these guys who are bad risks. After all, there are a host of investors out there who should know this information. Assisting these guys means enabling them in projecting the appearance of being in good standing, solid citizens, etc. rather than as skulking denizens of the dark with daggers drawn, literal cut purses and gamblers.
Many economists believe the Federal Reserve will cut its policy interest-rate target by a quarter-percentage point to 4.5% on Wednesday to contain the risks that financial market turmoil could continue, possibly leading to a recession."The risk of a financial-market disruption spilling over into real economic activity is too serious for the Fed to ignore," said Kevin Logan, U.S. economist at Dresdner Kleinwort, in a note to clients. "Not easing at this juncture runs the risk of a financial market catastrophe and a possible recession."
*snip*
"I had been [thinking] for a long time that they should not ease, but the fed funds futures being priced in so aggressively for easing, I'm wondering if there is something out there I don't know," Seto said.
Seto said he got the "clear impression" from reading the Fed speeches that the central bankers won't have a firm opinion of what to do when they arrive for the meeting.
*snip*
There is a small possibility that the Fed could cut rates by a half-a-percentage point. But some analysts say a big rate cut could be perceived as the Fed knowing something bad that the markets do not know.
Here it is: we are in trouble due to wild lending at super-low rates leading to the bidding up of various assets and things of every imaginable sort from the futures markets to stock markets, housing markets, etc. The entire problem came about due entirely to the Federal Reserve dropping interest rates lower and lower back in 2001 starting from January 6th of that year. Previous to the election, they tightened the screws, claiming there was inflation even though we were obviously in a recession. Looking at all the data 7 years later, one notices immediately that all the nations of the world went into recession starting in late 1999 and through all of 2000, a time when the Fed raised rates over and over again.
The minute Bush was declared the 'winner' of an election he lost, Greenspan began to losen rates...right in the teeth of Bush and the GOP irresponibly granting many huge tax cuts to everyone! Then we had 9/11 and rates dropped from a super-low of 3% to a super-duper, mega-low rate of 1%. Right in the teeth of obvious energy inflation. Energy is always a driver of inflation. It doesn't matter what the interest rates are, if energy is rising, inflation rages. This is because energy is a powerful component of all economic systems. From manufacturing to transport, energy is consumed. And as it rises, either wages are cut or profits vanish or both which causes either inflation if both can be passed on or a depression if neither can be passed on and trade and manufacturing slow down.
So, to give Bush his good economic news so he could cement power, Greenspan gave us free money. And boy, did we celebrate this windfall! Note in the story above, the last sentence. I highlighted it because it reveals how all our financial systems depend on ignorance, darkness and occult practices. Why should the Fed know something but HIDE it from me?
As if they can! HAHAHA. They can't hide it from me. I could go there with my charts and graphs and notes and scare them all to death. Especially Bernanke who specializes in understanding the Great Depression. Being a 'gas pedal/brake interest rate' monetarist, he imagines that if only the Fed made more money available at super-duper low rates, the Great Depression would not have happened. This is plainly silly. The Fed couldn't do this because the cause of the Great Depression was the Great War and the fact that the 'winners' all went bankrupt except for the US which got really burned by lending trillions of dollars to the Allies. And this was the biggest loan crash in history at that time.
Worse, the overextended British Empire continued to expand and had to spend more and more money holding onto India, China, Africa and so on. China was devolving into total chaos and the communist revolutionaries were harrying the troops and fighting the European puppet state. War lords were roaming the land and Japan was busy invading Korea and beginning to attack Manchuria. Russian revolutionaries refused to honor debts of the Czar and the collapse of all these loans and schemes were reaching fever pitch when Germany threw in the towel. France and England were depending on German industries paying for their goofy empires which involved violently holding other people in bondage. We fought WWI to expand criminal empires, not for any freedoms as Gandhi thoughtfully pointed out as he demanded England vacate India, for example.
Like today, the financial messes are imperial messes. The US empire which is simply an extention of the European empires, can't hold onto its rule of the Seven Seas and many lands and as we continue to expand and continue to wage illegal and criminal wars, we are also doing this by going into debt just like England and France in 1929.
Unable to face reality, we play all sorts of occult and dark games hoping this will allow us to rule the earth without paying for anything, we hope the Chinese and Russians will fund our rule! The corporations which our government protects are nearly all now tax cheats for they want 0% taxes compared to the 35% they are charged with here. Since they are refusing to pay to the tune of nearly a trillion a year, this means our empire is running on lots of red ink instead. The conservative side of the blogsphere is running this futile campaign to present our rulers with a petition begging for them to be fiscally responsible. But this petition does not call for higher taxes, sending our navy to all those tax havens and taking them over and taxing all the corporations hiding there, no.
As always, the people wanting to fix things don't want to fix anything real just like the people who created the Great Depression refused to vacate China or India or Africa, etc. I think a petition calling on the Federal Reserve to restory the M3 numbers which are STILL PUBLISHED IN EUROPE is a start towards some small honesty. Then we must change the inflation figures to truly reflect inflation, not the fake numbers. And then change the unemployment stats, too. Hell, reform all the goofy systems set up to lie to us.
Speaking of the devil, here is the NY Federal Reserve's report on EFFs
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Unfortunately, this file is a PDF file so it is much harder for me to extract all the nuggets here. I have several sections I thought were interesting but the whole study is of interest. Anyone wanting to understand the mind of the Federal Reserve Beast should take the time to read this study. Let's examine this page:
This is an interesting Federal Reserve report about EFF rates published just last May, 2007:
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OK: they set their rates and then try to get reality to conform with their happy ideal. They use various means to do this trick. I will note here that the Fed stupidly...VERY, FATALLY STUPIDLY...thinks the game here is to hold as little reserves as possible. NO OTHER MAJOR NATION DOES IT THIS WAY. None. They are all accumulating heroic reserves, far greater than the Federal Reserve. Many times greater! This is the new game.
The Fed, accustomed to setting the rules of international finance for 100 years hasn't figured out that this game ended in 1996 when Japan discovered the felicitous new tool for weakening the yen and thus, gaining trade advantage by hoarding dollars in their FOREX reserves. Then China joined them and one-upped them. Now Russia is doing this along with all the oil pumping nations including Venezuela and Peru, for example. Everyone is doing this! Now, India has joined. Meanwhile, the pointy pencils in the Fed haven't figured this out. Instead, they decided that huge FOREX reserves are not only useless but endanger the holders of these FOREX reserves!
They forget: these reserves have ONE FUCTION: to enable trade on better terms for the holders. Not to make profits via interest rates. Due to the games played by everyone, inflation is woefully understated. No, their only function is to gain profits via trade. Now, Canada must play this same game, they didn't hoard FOREX dollars and now the loonie is on par with the dollar and it is hurting Canada's trade with the US.
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Here is the classic game: let's make up formulas that are increasingly complex! This is lots of fun like any game but in this case, if all the presumptions plugged into the formula leave out important information, the formula fails. Big time. The Fed is evidently worried about easing things for bankers who can't even keep a measly 10% of their reserves in reserve! The minimum reserve is suggested by the Fed but bankers who are sober and sane keep MORE than this! In the olden times. Now, they can run off to the Fed rather than have a bank run! And so they keep nearly nothing in their vaults since they think the Fed will feed them forever no matter how reckless and careless they are!
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Banks get into this fix when they give out way too many loans. And attract little savings. In the US, the savings rate is abysmal. It has dropped to nearly nothing, nay, is now negative as people rushed to get cheap loans courtesy of the Federal Reserve blowing the biggest bubble in our history. All our debts, national and personal, shot through the roof. The accumulation of debts was historic and heroic and utterly stupid. And the Fed didn't have a formula for this?
SFR (stupid Federal Reserve)/lir (low interest rates)+GBJ (the monkey in the White House)=FUBAR (obvious what that means!)
PetroChina Co. and Alibaba.com Ltd. sold stock valued at more than $10 billion as investors increased bets on China, where shares have almost tripled this year.PetroChina, the world's second-largest company by market value, raised 66.8 billion yuan ($8.9 billion) in the biggest stock sale this year. Alibaba, the operator of China's largest trading Web site for companies, sold $1.5 billion of shares in the second-biggest initial public offering of an Internet company after Google Inc., said two people with knowledge of the matter.
China's markets are continuing to rise. Of course, they too will fall in the end as a global recession caused by the US overspending and excessive debts and too-small reserves will grip everyone by the throat. Only we won't sail out of this with our empire intact and our power greater. China's retraction will be painful but ours will be fatal. This is due to the logic of all imperial collapses. Just as England, no matter how she twisted and turned, could not shake the depression she caused, so it is with us. Both Germany and the US grew stronger from 1933-1939 while England weakened. When WWII finally began, it really was a confrontation of the new Great Powers: Germany, Japan, the US and Russia. England struggled in vain to hold onto its rotting empire. If the US didn't fight Japan, the Japanese would have finished off the last of the imperial holdings of Australia and India, for example. But the US propped up Britain across the planet and in the end, did most of the manufacturing of war materials.
So now, in this collapse, China will be the world power when all this unwinds. It is quite simple: China isn't up to its eyeballs in debts. And if the US discharges its debts like Russia did twice in the 20th Century, this will destroy us just like it destroyed Russia. And unlike Russia, the comeback won't be easy. Russia has energy to spare. We are on the downslope of the Hubbert Oil Peak and are very vulnerable since our entire transportation and living systems are set to a model that assumes cheap, easy oil.
The yuan rose the most in two years after China's central bank signaled it will allow the currency to appreciate faster to help narrow a record trade surplus and slow inflation.The currency climbed 0.3 percent after the People's Bank of China set the highest daily reference rate since it ended a fixed link to the dollar in July 2005. Deputy Governor Liu Shiyu said on Oct. 26 that foreign exchange markets have ``a role to play in correcting'' trade imbalances, reacting to calls for more rapid gains by the Group of Seven nations.
Long, long ago, I said that China does not want to be exactly like Japan. China does not want to strangle its work force, lay off people, etc. In the Japanese news today is the story that there are now more layoffs and unemployment in Japan. The people at the bottom of the economic ladder are paying 100% for the Japanese 'depression' while the top of the pyramid enjoys huge trade benefits and rising wealth. This system will either kill off the Japanese people via suicide, starvation and cessation of child bearing or there will be some revolutionary changes. China overflows with energy and they have to suppress births due to overpopulation. But they want things to improve at the bottom, not just the top.
Japan's super-cheap yen is a problem for China. But don't worry. The Chinese let the Japanese exhaust themselves trying to kill the yen then the Chinese rush in and force the yen right back down. This yo-yo game will continue and perhaps, worsen, over the next year.
IMF (International Monetary Fund) director, Rodrigo Rato, forecast that the dollar is due for a disorganized and pronounced fall.In declarations to the press, Rato said that the greenback may continue to fall rapidly, which, he added, would complicate the credit crisis in the United States.
Rato said there was a possibility of a worldwide recession in 2008 but this would not be his most important forecast.
What is his important forecast? Eh? HEH. And a 'disorganized' fall is fancy talk for 'falling off a cliff, screaming.' And what are the 'complications'? Ah, the joys of our dear little Sphinxes in world finance! They love to talk in various mysterious ways! 'Which currency walks on four feet in the morning, two feet during WWII and three feet since the Vietnam War?' hisses the Sphinx. Don't scratch your head too hard over this one. It wasn't the DM, yen or Vietnam's won.
The perceived creditworthiness of two of the largest financial guarantors in the US on Thursday plunged to lows not seen since the worst of the credit squeeze in August.MBIA and AMBAC are specialist companies that guarantee the repayment of bond principal and interest in the event of an issuer default - including bonds backed by subprime assets.After both companies this week reported third-quarter losses, investors have begun to speculate that the monolines, as they are known, might themselves in default on their outstanding debt.
We saw a huge banking collapse last August. It is continuing. Anyone reading the timeline of the Great Depression knows that the collapse of the banking system took over 4 years to complete and the recovery took 15 years before things began to seriously improve. All the gurantors of the system are now in danger because the entire system is in danger and NOT in nations with huge FOREX reserves. I like to put in a lot of seemingly disparate stories to see what comes into focus and today, it is obviously the hidden hand of the FOREX reserves we must look at to see what will happen next.
My prediction: the US will still refuse to understand how FOREX reseserves operate in the New World Order they, themselves, foolishly created. So, unlike China, the biggest reserves holder, we will continue with our super-low reserves regime and thus, will collapse into infamy and destruction. And killing the dollar won't make us richer if the Chinese have all the export manufacturing bases anyway. It just means we get raging inflation at home. Which the Fed will deal with by lowering our reserves even more! We will continue to follow the wrong magic formula while the Chinese follow a totally different formula and the Japanese will lie to us about their magic formula (the carry trade machine).
Saudi Arabia's King Abdullah is due to arrive in the UK on Monday for the first state visit by a Saudi monarch for 20 years.He will be the guest of Queen Elizabeth II at Buckingham Palace and is due to meet British political leaders on Wednesday, culminating in a glittering state banquet.
The visit is the product of years of patient diplomacy and is an indication of how Saudi Arabia has become one of the UK's closest allies in the Middle East.
Um, Saudi Arabia is not an ally of England. They are now an OWNER of England. The Queen has her pretty collection of diamond studded tax havens and the King of Saudi Arabia owns much of the Footsie Stock Exchange and the people of England get to pay rent to the Saudis who lend them money. Sounds like the USA. Here, the King comes in secret and makes secret deals with Bush and others and we have no idea what they say since it is all secret! Democracy at work. Maybe we could start an online petition to demand Bush tell us what all his secret meetings with Putin and the Saudis really are about..HAHAHA.
"The minute Bush was declared the 'winner' .....
Greenspan began to loosen rates ... right in the teeth of Bush and the GOP irresponibly granting many huge tax cuts to everyone!"
.............
"So, to give Bush his good economic news so he could cement power, Greenspan gave us free money."
Yes. See data below for the Greenspan + Bush – Twin Towers timeframe.
Date -- New Fed Funds rate
August21 2001 3.50
June 27 2001 3.75
May 15 2001 4.00
April 18 2001 4.50
March 20 2001 5.00
January 31 2001 5.50
January 3 2001 6.00
May 16 2000 6.50
March 21 2000 6.00
February 2 2000 5.75
In Easy Al's new book there is a chapter 10, "Downturn".
Most of the chapter is about his perplexity and dismay in early 2001 concerning
Because of the weight of all this and more, he concluded “Spending would have to be raised or taxes cut..... ”.
So he reversed position, proposed tax cuts to Congress, and they did cut taxes – in record time.
They even included the “Bush rebate”. Easy Al had some nuances in there about a glide-path and triggers: he himself admits it was “not the best time” to propose these nuances.
Before the Bush rebate checks were in the mail, “suddenly and inexplicably, federal revenues plunged.” Soon “....red ink was back to stay”.
It just happens that Al doesn't talk about setting short-term interest rates in this chapter. He waits until his next chapter on dealing with the financial aftermath of September 11, 2001.
As far as I can see, his book doesn't mention all those rate cuts above! They were to deal with a pesky little downturn – moral hazard be damned.
Posted by: Frederick N. Chase | October 30, 2007 at 12:57 PM
Yes, Greenspan, like all Republicans, worries about the national debt ONLY when Democrats are in charge. Bush rang up more debts than ALL PRESIDENTS IN OUR HISTORY TOGETHER. Isn't that funny?
And the worse part is, ever since 1966, all our Presidents, left, right and center, rang up debts. This is due to two things: our imperial pretensions and the Hubbert Oil Peak hitting the USA first of all nations.
Posted by: Elaine Supkis | October 30, 2007 at 05:26 PM
http://www.youtube.com/v/yfPjDT-spIs
Posted by: marc | October 30, 2007 at 11:59 PM
Marc's You Tube video is a good compilation of clips from TV showing clearly how the GOP has been beating the war drums against Iran.
If we read the ticker tape at the bottom of the CNN segments, it is most amusing seeing how this war talk is destroying our economy.
Posted by: Elaine Supkis | October 31, 2007 at 12:16 AM
Thanks the for in depth fact finding on this Elaine, much appreciated.
Seems the markets today have had their say about what they really think about the 1/4pt rate cut, with the Dow at -362.
The USD index went up 23 cents to 76.69, but last night was at 76.45 -- it's lowest point ever!
If I worked at yahoo finance writing their stories, I'd have a problem explaining these things with the same old same old all the time.
They'd have articles like "Post-Halloween doldrums leave investors uneasy" instead of the belly laugh for today:
"Stock Investors Fear End to Rate Cuts" LOL
Here's a couple other interesting links:
"The Slosh Report" on TOMOs:
http://www.gmtfo.com/reporeader/OMOps.aspx
I thought the Denninger video from last night was entertaining. Nothing you don't already know, but he does have a great way of stating it:
http://tickervideo.org/boo/boo.html
Lastly, signing the petition for financial responsibilty is something anyone in their right mind should do:
http://financialpetition.org/
Posted by: Big hearts come later | November 01, 2007 at 05:12 PM
The financial petition doesn't call for an end to the empire. And who exactly voted in everyone who spent trillions of dollars?
Posted by: Elaine Supkis | November 01, 2007 at 05:15 PM
This is all true.
In many ways it's futile except to display on the record disgust at the current system.
Same with empires - I don't think there's been a time in history were an empire said:
"Wow, look at all these signatures! I think the people really don't like what we're doing. We should stop."
oh that was a belly laugh - if only.
Posted by: Big hearts come later | November 02, 2007 at 03:52 AM
We all knew perfectly well when Bush ran for office what would happen next. Clinton finally balanced the budget and Gore was going to pay it down but Bush said, 'Let's have TAX CUTS and PARTY, dudes!' The media said, 'Bush is someone you can drink beer with!' And so there are many people today who should hang their heads in shame and about 90% of them are republicans.
Posted by: Elaine Supkis | November 02, 2007 at 04:42 AM
EEK! The Derivative Beast's madcap dwarves have invaded my blog! Begone, foul creature of the Caves of Death!
Posted by: Elaine Meinel Supkis | May 23, 2008 at 11:00 AM
interesting, thanks Elaine.
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Thanks for the post mate.
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banks prefer to make deals with each other and not share 'business' but when business involves working with stinky things like trashy tranches, the Fed is the bank of last resort.
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Posted by: Ruby Josef | July 30, 2010 at 09:22 AM
Just because a crisis has not occured before doesn't mean it won't happen now.
When I mentioned devaluation of the sterling and the run on banks not so long ago mostly everyone laughed and I was greeted with the excuse that it has never happened before...like that is any proof that it was not going to have to happen!
can We really survive long term economically with our reserves and trade deficits?
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